On The Brink with Castle Island - Lorien Gabel (Figment) on the Latest Developments in the Staking Market (EP.579)

Episode Date: December 3, 2024

Lorien Gabel, the founder and CEO of Figment joins the show. In this episode we discuss: The latest developments at Figment. Post-election impact on the general crypto markets and the staking category. How Figment is approaching the institutional staking market opportunity. Staking in the context of investment products. Evolving ecosystems like Eigen Layer, Babylon and Bitcoin Layers 2s. The stablecoin market. To learn more about Figment visit www.figment.io

Today on the podcast, I sat down with Lorian Gable, the founder of Figman. A lot has changed in the staking market since the last time Lauren was on the show. And I was excited to chat with him about the institutional market landscape for staking, the regulator shift in the United States recently, and the Bitcoin L2 ecosystem. I think you'll enjoy this one. So without further ado, here's my conversation with Lorian from Figman. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions

and do not reflect the opinions of Castle Island Ventures. Guest and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees,

will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping into. to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. And print a couple trillion dollars and all of a sudden people start to worry.

So out of this worry, we have something called the Bitcoin. Well, Lauren, welcome back on the podcast. It's been a long time since you were on over a year, I think. So love recording with you on an all-time high day in a world where the regulatory picture is getting better. That's right. Well, thank you for doing that. So I think we had a fairly sedate conversation last time. So maybe we'll be able to more exciting on this one. So for those that didn't listen to the first episode, maybe just T.F. What is Figment? What do you guys do? Great. Thanks. And it's good to be here again. It's good to see you. So Figment, I believe, we're the largest institutional staking provider, which basically means we make a lot of blocks on the most

proof of state protocols that matter on behalf of our clients. So if you're a large token holder, whether it's an ETP or an asset manager or someone like Castle Island and you want to stake those tokens of the number of things you're doing, then you would be a potential customer of ours. We've been around for a long time, at least in crypto years. So I think we're coming up on our seventh year right now. So we've kind of been through it all way back when the only stake of a asset was Tesos, if we remember that. And really sort of have a focus on large token holders, regulatory compliance, all the stock and security stuff you care about. And we have a general view that wherever there's money in traditional payment rails or financial rails, crypto will follow.

And I think we'll talk about that a little bit, but we're starting to see that. And Staking is really the equivalent of a checking account where there's a savings account. So we kind of view our business is sort of a fundamental layer for everything. Up until now, I actually used to say everything about Bitcoin, but maybe Bitcoin now too. And so there's a lot of things people can do with their tokens. You can go up the risk curve, as they say, but we're kind of at the lowest risk, if you're a long-term older activity you can do. That's awesome.

So I'd love to dive into just what it's been like to operate a company in this regulatory environment for the past four years for you. and then how you're feeling about the current road ahead, just given what's gone on with the elections? Yeah, great question. So there's a lot of different ways we could take that. So from a regulatory perspective, I kind of had a long-term thesis, which probably people got tired of me saying this. My old Winston Churchill joke about the Americans do the right thing after they tried everything else. And we've been into trying everything out of stage for a long time. So the net effect for us is that we operate globally. We have an Asian team and in Europe. And those markets have been relatively

strong because they've been ahead of the curve on regulation and setting up rational frameworks that people can work with. So our client base that is based in those jurisdictions is generally from an institutional perspective, generally felt more comfortable with staking. So those markets have really sort of sustained the company through the last couple of years. And then North America, which was our original market, we're Canadian based, but most of our people and our customers are in the U.S. or Canada. And so it's a huge, important market. But it's been, if not frozen, relatively flat for those. the last couple years and primarily, I think, for regulatory reasons. My alternative to the vibe

is kinetic energy. And just in North America, there just hasn't been a lot of kinetic energy into the ecosystem, whether it's people, whether it's capital, whether it's institutions of various types running crypto experiments, et cetera. And so that has just, if not overnight, you know, it started with the Bitcoin ETS, but has really changed in the post-election, et cetera. So, you know, I think we would have gotten to this space. It just pulls it up by a year. or two. So I'm an optimist, but I don't think things could have been any worse in any new regime. So I think we'll kind of merge somewhere in the middle. I think we're actually a little overhyped at the point. I think expectations are possibly a little bit too high right now.

And the realities of congressional sausage-making appointments, things happening will sort of hit people a little bit and there will be a trough of disillusionment, but things still are going to take time. Things aren't going to change overnight. Washington is never a pretty place, even when someone's predisposed to support the industry rather than kill it. So, but yeah, so, Even overnight, we've sort of seen a lot more activity from clients who we're saying we're not going to stake in the U.S. but we're stake in Asia and Europe and now sort of looking at changing that this year. And there are deals, RFBs and stuff that we won like two years ago that they just never launched because of the crack on coin base lawsuits. And it have now come around and you know what, we're going to do something next year.

That's awesome. People talk a lot about the regulatory landscape and think about the impact that it has on revenue and the impact that it has on capital formation. but not a lot of people talk about just what the impact is on the humans that work at some of these companies and just the general tone. So what's that been like from a just cultural experience for you managing this team? We've been in front of regulators with some of our like custody partners or some of our asset manager clients and other jurisdictions where we've been in front of people like the SEC and made submissions about why staking isn't lending and why there's no counterparty risk or very minimal counterparty risk. And what exactly is this weird thing called staking that sounds like, I don't know, whatever, it sounds like it could be lending or could be defy or it could be something, but it's kind of neither and doesn't really have an analogy in traditional finance. We've had the opportunity to present

what it is when the regulators be like, okay, that makes sense. Well, here's what you shouldn't do. And this is from a consumer protection perspective, we feel comfortable with that. That process, like, never happened in the U.S. And only last week did we have people up in Washington with, like, a position paper talking to both regulators and really just from an education perspective. And so we've done that in many other jurisdictions. We've done it with the OSC in Canada. And just had never been had the ability. No one cared. No one wanted to listen. It wasn't going to be fruitful. You'd probably put a bullet on your back if you were proactive in that regard. So that's changed significantly. Regulatory compliance has always been like a value prop for us. We've had that

infrastructure, which a lot of our clients care about. But you kind of operate from a place of fear generally. And like what's the least amount of your cost benefit analysis is all messed up? And I think now we can have a normal conversation about like a product release or how you go to market that is like, okay, here's what we think of rational framework is going to work at. Here's the downside. Here's the realistic downside. And it was always like really bad before. The downside. It was hard to come to a conclusion that you should do something, basically, or to recommend that your clients do something. We don't give legal advice, but they come to us and be like, how should we launch a staging program? And we've just been like ultra-conservative with at least

North American clients like, do this, do this, do this, don't do this, don't do this, don't do this, don't do this, And they're like, okay, well, maybe we'll wait. Right, right. Maybe we won't do anything. But it's hard not to see that changing. We'll probably get a market structure bill here. Who knows if it's six months from now, a year from now. But expect that a new head of the SEC would seriously look at a safe harbor or some sort of no action letter framework for some operators.

And then you kind of step back and you look at just who is in this market in the U.S. in terms of financial services firms, asset managers, broker dealers, banks. no one has this infrastructure built out yet. So what's the next couple years going to look like in terms of who should be staking the types of customers that are now addressable potentially? I'll tell you why I'm a little bit conflicted about this personally, but from a traditional financial adoption perspective, which people talk about institutions, blah, blah, blah,

yeah, I mean, you've seen some people do it like Robin Hood, who has been very successful. And I think you're going to see basically emerging both ways between crypto, brokerages, all the various financial service players. those are all going to merge and crypto will be part of it. So all the big brokerages, all the big RIAs, all those firms are going to start to add crypto to their traditional offerings and vice versa. And you're starting to see, you know, at crypto.com is now getting into equity trading,

right? So I think you're going to just see emerging of those in both directions. And so if that's right, wherever there's money, there's going to be crypto. And then wherever there's crypto, staking basically runs the protocol. So like wherever there's Bitcoin, there's Bitcoin mining, right? And so wherever there's crypto, there's going to be a staking component to run and participate in the protocol. Not everyone's going to do it for various reasons because they need liquidity or they want to move up the risk curve of what they do with their crypto or what they need it for. But much like there's checking accounts at every bank, we think that people will have the equivalent of a staking account wherever that exists.

Now, we don't serve the end user, but we'll serve those institutions that want to offer that. So we're pretty bullish in that respect. And I think you're starting to see that. You're seeing a bunch of neo banks in South America start to add crypto. We're just kind of revolutionizing sort of consumer banking services. And whenever they do that, they add a crypto rail. And so basically wherever there's a rail, there's going to be a staking rail because that's kind of the safest thing you can do with your crypto while you're holding

onto it. It is an application as a long-term holder from my perspective and a core part. Like you can't have a proof of state protocol without staking. It doesn't really work. Like you can't have Bitcoin without miners. So we're pretty optimistic about that, and especially in North America. It's really interesting to me to just think about what this market structure could look like if there were no constraints on some of these big players from getting in and

staking because there aren't that many companies like Figment out there to use, right? So there's a lot of subscale players maybe, but what do you think the consideration is going to be for some of these bigger firms around doing a deal with Figment versus would they try to build it themselves for a couple of years? Like, how do you think about what this ends up looking like? I mean, there's a couple of different ways. If you looked at like large exchanges like Coinbase and Crack and what they've done is they've sort of tried to build themselves and then made an out.

acquisition in the space. So I think that would be one way to do it. I think that you can probably most technically competent organizations can build staking for a token or two. But the complication, they're all kind of like slightly different. Like the difference between Salon and Ethereum at scale, they're both staking, but they're not even like the same thing from the hardware level to the software level to the ward to the reporting. Like they're very different things at scale. So it gets like complicated pretty quickly. So if some organizations will try to do it internally and some will just make that decision and they'll get at it over time. But I think in most cases, like again, it's a very simple thing. Most staking is built so that you and I could figure it out and do it ourselves,

like with a little bit of time. We could do that ourselves. But we have billions of dollars and reward flows associated with that. It's just hard to do at scale, basically. Just the reporting itself, like tracking reward flows on Solana. You'd be like, well, it's an open ledger, just like look how much in your wallet. It's actually really complicated. There's three or four different reward sources. There's MEP calculations. It's really hard just to figure out what you've earned on a given day, which you need for a whole bunch of reasons. So it's like, oh, it's just like an easy problem. But it's actually pretty complicated. And even we still wrestle with that and actually getting like accurate data off a blockchain in the time we matter. So again, obviously some people

try to do it themselves and some people make acquisitions in the space. But if you want someone that like has a significant balance sheet, has a long track record, has all the security certifications that checkboxes that are going to need. A lot of these institutions have like 200-page RFPs for what I think is a relatively simple service. They have a lot of box checking that have built up over the ears. And so there's only a few of us globally that can do that successfully. Yeah, and you point out the pace of change here.

I think the last time you were on this podcast, we were talking about the Ethereum merge. And since then, you've seen the launch of eigenlayer. You've seen this Bitcoin L2 ecosystem pop up. Yeah, we have a kind of saying here that it's going to become more ubiquitous. staking will get weirder. So it's kind of like a barbell thing, which we focus on salon and Ethereum and building the most safe and effective and highest reward return within those two protocols. But then at the other end of the barbell, there's a whole bunch of crazy

stuff that we just need to participate in because some of it will succeed. Most of it will fail, but some of it will succeed. So we need to be there. But yeah, I think it's just going to get weirder over the next year at that side of the barbell. Yeah. Yeah. And what are you guys seeing from customers in terms of what they're asking for, particularly interested in Eigenlayer in the Bitcoin L2 space. Yeah, I mean, the honest answer, you have to kind of define institutions. And if you define some VCs, there are DGEN VCs, right? So there's a bunch of DGEN that have invested in early stage in Eugen and Babylon and

for Bitcoin and Stagen and are going to participate in the ecosystem. I think a lot of the early interest in like Eigen was driven mostly by point farming and DGens, to be frank. And I think it still remains to be proven. Like, where's the demand for block space? I think the supply is clear. Like, we know that we can make more of it using other base sales. So I feel good about the supply side.

It's kind of working. I'm still not sure the demand comes from in at least the short term. And I think that's still an outstanding question for all the sort of restaking type activities. So, yeah, it's a good way to create more block space, which is great. And I think over time, more and more block space will be consumed, just like as a general principle. We need the demand side to pick up basically before I can say, like, this is going to be an actual thing. What are your thoughts on just the story around Bitcoin being this inert asset that some subset of Bitcoin holders is looking for yield on in the Bitcoin L2 satisfying that

customer need? Again, like I get the supply, we're going to be there. We're going to participate we'll run finality providers and we'll run that core infrastructure. We're always just thinking about Bitcoin at some point because it's not native staking, you kind of giving up your keys. ish, right, where you're not necessarily doing that with traditional staking, right? You're not giving us your keys or control of anything. So there's kind of a philosophy behind Bitcoin, which is pretty strong orientation between like do nothing, right? So I think you have to get over that hurdle.

But yeah, I mean, if people actually start doing stuff using Bitcoin security, it's a massive tam and probably a massive challenge to all the other proof of stake protocols, right, in some sense, just because of the sheer size difference. show on the economic security and the diversification. So yeah, it's cool. We want to be there. I definitely need to be part of that market. If it's there, we've supported, made some investments in that area on the fun side. But again, I think one, you need to have the demand, the problem that I sort of talked about before with the restaking program. And then you kind of got to get over. There's like a natural inertia in Bitcoin. Just like it is very, very, very strong.

Yeah. That's a great point. Yeah. I mean, I just think by personal self, like, I buy a little Bitcoin every week and have done so for a long. time, not an OG like 2011 or anything like that. I hold it not in a centralized institution. I'm not even like a Bitcoin max or anything, obviously, but this is this asset which I control in some way and I want to have any risk of loss. I mean, I will do it. I probably will do it because I want to check out my UX and make sure it works. And I will do some of it. But I can just see that as emotional hesitancy there as a Bitcoin holder. You know, I can do all the crazy stuff with my Ethereum and my Solana and blah, blah, blah. Yeah, I think a lot of Bitcoin

people would have the multiple buckets of their Bitcoin, some of the Bitcoin that will never move ever, some that would be on centralized exchanges, maybe some that is in that kind of D-Gen category. But it's excited. There's a lot of security that isn't used for much, I suppose. I guess it's one way to characterize it, right? So in a lot of decentralization that isn't being taken to, it is the most decentralized blockchain, et cetera. So if it can work, it'd be pretty cool. So it'd be good for our business because I never assume I always say we're everything about Bitcoin. So if Bitcoin's the only, protocol left standing at the end of the day, then we don't really have a business. And I never thought that was going to be the case, obviously. But now I can sort of hedge that statement. I guess have to

change it. And maybe Bitcoin. So we'll see. But it's cool stuff going on. I love the experimentation. And we'll have the regulatory space to do it. And it's kind of what's cool about the space. Yeah, it kind of reminds me of some of the early experiments with Bitcoin and their side chains era, open assets protocol. Some of these things that didn't really work in the first wave, it'll be interesting to see if they can gain adoption in the second wave. It's funny how things come back and maybe they're just too early. Timing means a lot. But we talk about end use cases for blockchains in general.

And I actually think kind of the ICO boom kind of ruined like actually a core use case for a token, which is actually better capital formation. So this isn't my original thought. And a lot of people have sort of expressed this. But I really think that if you're just starting like you didn't have qualified investors, you didn't have 40 page preferred 40-80 page preferred shareholder documents. You didn't have the regulatory framework. we have now. If you were just like, how can we have the safest, most effective capital formation

for early companies or organizations, the token just is better. Not better always. Like, sometimes liquidity isn't better always, right? Liquity isn't necessarily feature in a bug, but you can deal with the equity issues. But it's just an easier way to do things. And so the investor protection laws are probably going to change, right? Like the qualified investors are probably going to do a test or something like that next year. I think that's probably proved that you're somewhat financially illiterate. So that it'll open up that market. There's no reason that rich people should be there, any ones who get rich or beta investments. So I really think that actual the use case, again, I'm kind of digressing over it. For a blockchain is around something around

capital formation. It just makes more sense. It would probably be like if you're starting from scratch, it would be part of probably any early stage capital tool. Yeah. And I think you could make an argument that maybe the technology actually wasn't there at the time for SEOs, putting the regulatory aside. But you think about what zero knowledge proofs could do to something like that where you're not necessarily even having to bring your full identity on chain, but you can attest that you're not on an OFAC list. That just seems to me like something that will happen. I don't know if that's five years out or 10 years out, but it seems inevitable. You've passed the test. You've held it for this long, all that kind of stuff. Yeah. It's just

like easier and more efficient and less lawyers, et cetera, et cetera. So I think that that, again, has a bad smell to it from the ICO stuff. But I think in the end of the day, it's going to be used for capital formation as one of the end user cases. One of the places where there is kind of unquestionable product market fit, if you just look at the chain itself and what it's being used for any of these chains, really, maybe with the exception of Bitcoin is stable coins. So curious what your views are on this category. Obviously, it's just exploded since the last time we spoke. Yeah, I think you've had some guests on recently who have talked about it. And the original use case for stable coins was mostly because you needed something to do when you weren't trading. like you need something that was safe and low volatility.

And I think that people are, it's just a much better way now to, you're going to start to see people using it for payments like with PayPal, etc. And so it's just, again, you know, a digitalized version of a dollar, which the costs are lower and it's easier and it's lower friction, especially for small amounts. So I just think they make sense. And my perspective, you know, I kind of joke that really the use case for Ethereum right now is as a payment rails for stable coins. And that's still basically true.

I mean, yeah, there's a lot of defy activity, but a lot of that. defy activity is just trading other tokens. I kind of don't really count that in a way, right? But really, I mean, primarily and now Solana a little bit more too is really those are the newer versions of the Visa networks, basically. So we don't really have a specific stable coin play per se for our business, but if it increases transaction volume, our business is at the end of the day really made up of like only two sources on a blockchain.

It comes from inflation, which is kind of fake in a real. I guess you got paid a little bit for making blocks and your electricity and stuff like And the other one is usage fees. So, I mean, at the end of day, the only way people are going to stake or that we're going to make any money by doing it on their behalf is if people use the blockchains and are playing some form of Mavio transaction fees. And so stable coins is an actual real source. People want to move value around in that way.

And so it's an actual source of transaction fees, which we get a very, very, very, very, very small portion of in our business. So, yeah, it's great. But I think it is actually still only the kind of the scaled end user application right now. Yeah, certainly for remittance companies and neobanks seems to be a big use case. I like to say what's old is new in this industry, some of these ideas that we mentioned. In 2014, they fail and then they come around again. Oh, you mean you invented the bus?

Yeah, right. Yeah, exactly. But one of these things that keeps on coming up is this idea of consortium chans to do things in the securities world. So this idea of having consortiums of financial services firms, maybe that process trades. And a lot of these things in the early days were just strictly private blockchains and increasingly maybe these things merge. Like the dark pool analogy or something like that. Yeah, like dark pools or even having this concept of something like base where you could have a closed ecosystem version of base and then have a tie down to a public chain for net settlement or something like that.

And so what do you think about this? Is this actually going to happen with financial services firms putting together like chains for corporate bonds and things like that? Yeah, I think we're going to see that. The experimentation, I think so. I mean, I think you're going to see a lot of replication of base, obviously, because the profitability is so significant. So definitely, I think a lot of people are going to try to do that themselves and get some fragmentation. I don't know how you deal with like the TVO fragmentation. In that case, I'm not sure people smarter than me will have to figure that out. But yeah, I think that you will see that when then you have to figure out all the interoperability. But I'm pretty positive. Again, it depends on where liquidity all the time is either a good, thing or a bad thing. And there are a lot of like places where it's not actually a good thing. Like you don't want to have 24 hour 365 trading of assets, right? So I think people will probably make that mistake and not realize which one should be which and that'll go poorly because no one will be interested. I mean, there was some real estate stuff. I don't know, but there was some like hotels in Aspen or something that did this. Do you remember that? Yes. I remember

that tokenized version of a hotel in Aspen. Yeah, right. I don't know. Maybe not, but maybe some type of bond instrument. Sure. Okay. Well, you think about kind of the gating factor in some of these asset classes. It's actually the dollar leg of the transaction.

Like, just look at how big the U.S. repo market is. Would you want to have overnight risk to any staple coin issuer right now if you're settling close to a trillion dollars in a given week of overnight repo? So then you're sort of in a world where you're saying, well, wouldn't it be nice if the Fed had a coin or something like that. There's a logical conclusion where this might end up having to be like a wholesale dollar that is issued by the government to settle some of these huge transactions. And obviously we probably don't want that at a retail level with full surveillance on all your your good. So these are actually pretty complicated conversations from a policy perspective in terms

of how far you want to push it. And you get a horseshoot sort of from the NJUZE. You get really blockchain. Yes, great, awesome. But not for you. Not for the Treasury. No, no, no, no. We didn't mean that. So I think that's probably right. So what else is on the roadmap here for the next year for you guys? What are you most excited about? We talked about the BTC staking. So again, that's a big trying to figure that out properly. And there's probably 10 now well-funded companies in that area.

So we're going to hope to pick the four or five winners to participate. So that's a big one for us. The ETH ETPs, I think we're going to see a lot more. I think we'll start to see ETS, not just an ETH, but also in Solana. and obviously, Solana is doing a Salana thing right now, which is fantastic. But I think you'll start to see DTF universe, which is really our core market. So, you know, we've been serving all the TPP riders in Europe for a while and we'll be serving a majority of the ones in the U.S. And so that's really like our core market.

So I think that that's pretty positive and we're looking to sort of keep up with that. I'm very curious about ETH overall. I would think we're at maximum negative vibes about ETH right now. Whenever that happens in crypto, I'm kind of like, okay. You think it's at the bottom? Once everyone's like read five-year development plans and gotten really depressed, like, okay, we're now at the bottom. And it seems to be the thing with crypto is when everyone's bailed,

and all of a sudden it's going to triple. But I'm really curious to sort of see what happens with the Ethereum community and the developer community. And there's obviously a lot of criticism going around, and I'm not in those debates at all. But it's a big part of our business. We're responsible for a significant single digit. of East Block production.

So we obviously care. But I think that clearly something has to change within that ecosystem in some way and around the development roadmap. I'm pretty curious how that goes up. It's not really like a necessarily business opportunity or something that were like a new market or anything like that. But I'm just like, I want to see how that plays out. And we're starting to have those debates.

And some of them are more intelligent than others because it's crypto. So someone's kind of childish. But yeah, I think it's a pretty pivotal year of 2025 for Ethereum. Yeah, I agree. I mean, it's going to be interesting with some of these parallels. L-EVM blockchain's launching next year as well. How does that impact Ethereum? Hopefully the legacy of Ethereum is not just coming up with EVM for other people,

basically, right? That would be a little bit sad, but I don't know, maybe. So I'm like sort of curious to how that plays out. Do you guys have a perspective on Ethereum? Well, I guess we should disclose the bias that we are Ethereum holders, but we are also investors in Monad and very excited about that. We are also, absolutely. So I look at that and I say, well,

if you were building Ethereum today, it'd probably look closer to Monad than it would to Ethereum, I would think. That's right. So these things are also people bets to a certain degree. And so at the same time, I wouldn't fade the Ethereum folks. I will make the observation that you and I and probably most of the people listening to this right now, like, we're in this world every day. So we like know what a Monad.

We know what Ethereum is. Like, you still have conversations and everyone having these conversations at Thanksgiving. Most people have heard of Bitcoin and might be able to tell you something about it? Like most people, like still, I'm not of that. It's still early. But if you go like one level below Ethereum, you're just going to get blank stairs. I don't know what the 90% of the population. I don't know. Some significant part of the population of smart people have no idea what staking is might have heard Ethereum, but couldn't tell you the difference in Ethereum and Bitcoin. I think that's right. I wonder if that'll ever change or if that'll be a situation where most people

actually don't understand what TLS is or SMTP. Like these things that are. ended up being big and huge companies got built on top of them. Or the difference between a bond and inequity? I don't know. Maybe it's that fundamental. Maybe financial literacy is just that bad. Yeah. Maybe people know what Coinbase is and Bitcoin and Ethereum and like maybe.

But how much of this do you have to know? But even kids like, yes, teenagers or 20 year olds. It's not even an age thing. It's not even like, OK, boomer. There's still like a very low level of awareness, I would say. I think that's right. But I think that plays into what you said earlier. about crypto and financial services brokerage is merging. Because if you just look at the

intergenerational wealth transfer that'll happen in North America over the next 20 years, there'll be a lot of inheritance. And will that money stay with wirehouse banks and financial advisors or will that migrate to different platforms that actually have crypto enabled on their platform out of the gate? I think that's a huge open question. I think that's right. And again, our thesis is that all those people are going to have a crypto rail, they're going to have at least a few assets on there and they'll need all the infrastructure services to come behind that. So yeah, I'm just like still amazed, just being immersed in it to how actually a little people know about crypto.

Even people who own Bitcoin, like a lot of people own Bitcoin, they still don't really know anything about crypto. I want to make a push not only to change some of these regulators, but to actually have some education pitches. Like if you go on the website for the SEC about crypto, it's just all about all the scams and just lists all the, but what you should have like investor education about these things? Just what do these things do?

what should be concerned about. That's actually useful in terms of protecting investors in this category. I think that's right. It's not that complicated that you can diagram it out. But I think that's optimistic. Like it's fun. There's still a lot of room to grow. So I'm resisting that it's early stage because it's not that early. We've been around for a while, but there's still a lot of market penetration to happen. I think that's right. But I think some of our allies have changed a little bit, right? So if you look at Sab 121 going away, all of a sudden now the banks are walking arms with the crypto industry in terms of pushing for some of those clarities. I had mentioned some personal conflict before.

I don't know how you feel about this, but like you're not working at Goldman Sachs and you're not working at Chase. Like, JPMorgan, there's a reason you and I aren't doing that. And I think there's a decent chance that both of us like post the bailouts. We're like, screw this. This is just a corrupt industry. Something needs to change. It's a bunch of seven or eight people, which really control the seven or eight

organizations, which really and plus the treas, through a control that I have a lot of rent seeking going on and essentially have like quasi monopoly power. And so something needs to be better and pretty turned off by the system. And I do have a little bit like, I'm just going to get like a J.P. Morgan T-shirt out of this. Yeah. Like I kind of don't care. Clearly my client base, but like it also has to be more than that, I think. I 100% agree with you. I mean, we need to preserve Defi. We need to make sure that this is not like a walled garden thing. And I think the way you do that, maybe the first step is to just codify self-custody. and the ability to self-custody crypto assets is something that is a First Amendment issue.

But yeah, you're right on the merging of the kind of the banks and is this the evil empire taking over. When Schumer flipped on crypto this year, that was very telling. You look at who the donors are to Schumer, who his constituencies. I mean, the banks are really powerful behind the scenes. That's right. So, and again, like, it's a good thing. It's probably a good thing for my business. I was in the short term.

But, like, it would be really sad if the experimentation went away or, the defy platform was regulated in the same way as a traditional exchange, that wouldn't be good. Yeah, I think letting defy evolve and be weird here for at least a little while is probably the best way to do it. Some more weirdness would be good. So I agree with that fully. Awesome. Well, this has been a lot of fun, learning. Looking forward to checking in with you once we actually get some of these laws. So appreciate it. And thanks for all you do for the industry. All right. Likewise, you too. Good talk to your map. Thanks for listening to another episode of On the Brink with Castle Island. To find out out more about Castle Island, visit castle island.Vc. To listen to all of our podcast episodes,

please go to on the brink dashpodcast.com or just click on the tab in our website. Thanks for listening.